Monday, August 9, 2010

Export recovery continues

German exports increased by 3.8% QoQ in June, from a May surge of 7.9%. At the same time, imports increased by 1.9%, from 13.7% in May. As a consequence, the trade surplus widened further to 14.1 billion euro, from 9.8 billion euro in May, supporting the strong pick-up in economic growth in the second quarter.

The German export sector remains the main driver of the recovery. Needless to say that the current export dynamics are not a new status quo. They will eventually slow down. However, with still strong demand, particularly from Asia, for goods “Made in Germany” and the lagging impact of the euro weakening in the first half of the year, German manufacturers are looking into a bright near term future. Filled order books speak volumes. As a consequence, further improvements in the manufacturing sector should once again stabilize the labour market. With more and more people returning from short-work schemes to full time schemes to work off increasing backlogs, some minor employment growth should not be excluded in the coming months.

With today's trade numbers, the time of nitpicking has come to an end. This week’s release of second quarter growth should be a cracker. Up to now, industrial production has shown an impressive performance and even private consumption seems to have stabilized. The German economy is bound to see its strongest quarterly growth rate since reunification.